Презентация с 2-й региональной конференции ИФА по международному налогообложению, 7/8 октября 2013 года

1. Controlled Transactions
and Related Parties
under New Ukrainian Transfer Pricing Rules
Speaker: Roman Blazhko, Senior Associate,
Law Firm «Lavrynovych and Partners»

2. Content
1. Controlled Transactions
•
1.1. Essence, History and Global Experience
•
1.2. Ukrainian Realities
2. Related Parties in Ukraine before and after the Law of
Ukraine on Transfer Pricing

3. Controlled Transactions:
Essence, History, Global Experience 1/1
•
Controlled Transactions (CT) – transactions on purchase/sale of goods/services
which come within the provisions of transfer pricing rules
•
Price formation in CT– transfer pricing
•
Goals of transfer pricing: (а) tax planning and tax avoidance, (b) redistribution of
profit within the group of companies, (c) adjustment of the pricing policy in the group
of companies
•
USA – the first country which has introduced transfer pricing regulation on the
statutory level
•
European experience – the legislation developed on the basis of the Transfer
Pricing Guidelines for Multinational Enterprises and Tax Administrations introduced
by the Organization for Economic Co-operation and Development (OECD) in 1995
(OECD Guidelines)

4. Controlled Transactions:
Ukrainian Realities 1/7
* - The effective date of the Law on Transfer Pricing
** - The categories of these parties are shown on the next slide
*** - Approximately USD 6.25 million

5. Controlled Transactions:
Ukrainian Realities 2/7

6. Controlled Transactions:
Ukrainian Realities 3/7
Non-related Non-residents Participants of CT
•
Preliminary Draft Law – control over the jurisdictions where the rate of CIT is lower
by 5 percentage points than that in Ukraine => lower than 14% (19%-5% - for 2013) or
11% (16%-5% - for 2014)
•
Enacted Law – control over the jurisdictions where the corporate income tax is lower
by 5% than that in Ukraine => lower than 18,05% (19%- 5% of 19% - for 2013) or
15,2% (16%-5% of 16% - for 2014)

7. Controlled Transactions:
Ukrainian Realities 4/7
Non-related Non-residents Participants of CT
Control over jurisdictions where:
•
the rate of the CIT is lower by 5% or more
than that in Ukraine
Statutory rate
and also where:
•
residents pay CIT at the rate which is
lower by 5% or more than that in Ukraine
The effective rate
(including all possible
reliefs, exemptions and
refunds)

8. Controlled Transactions:
Ukrainian Realities 5/7
Non-related Non-residents Participants of CT
The draft list of jurisdictions having the rate of the CIT which by 5 or more % lower than
the basic rate of the CIT in Ukraine:
•
92 jurisdictions, 29 of which are true tax havens* (Belize, British Virgin Islands, the
Isle of Man, etc.)
•
Some «decent» jurisdictions are in the draft list: Germany, Switzerland, Cyprus,
Latvia
•
Malta with its 35% CIT is in the draft list (most likely, given its generous CIT refund
triggered at stage of the distribution of dividends)
* - according to the List of the Offshore Zones (Tax Havens) approved by the instruction of the Cabinet of
Ministers of Ukraine No. 143-p as of 23 February 2011.

9. Controlled Transactions:
Ukrainian Realities 6/7
Rates of the CIT in Certain Jurisdictions

10. Controlled Transactions:
Ukrainian Realities 7/7
Comparison with Russian Federation (RF), United Kingdom (UK)
and OECD Guidelines
*- for certain categories of taxpayers (for example, for the payers of mineral extraction tax) this threshold is much lower
than RUB 2 billion.

11. Related Parties in Ukraine before and after the
Law of Ukraine on Transfer Pricing 1/2
Particulars of “Ukrainian” Related Parties
The definitions of related parties according to
the Tax Code of Ukraine (after the enactment
of the Transfer Pricing Law) and according to
the Tax Code of RF are almost identical

12. Related Parties in Ukraine before and after the
Law of Ukraine on Transfer Pricing 2/2
Changes with respect to Related Parties
•
Related Parties are divided based on subjects (for example, legal entities, individuals,
etc.) and criteria of relativeness (shareholdings, control, etc.)
•
Clarified that in the course of the determination of relativeness the possible rather
than actual influence of one party on another should be taken into account

13. Questions
Thank you for your attention!

14. The information contained in this presentation does not constitute legal
advice. The aforementioned information bears informative and not an
advisory nature. In order to obtain legal assistance on the matters
considered in this presentation, you may refer to your advisers.